Buying Parents a Home While Avoiding Investment Loans

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Have you ever found yourself in a situation where you wanted your folks to move closer to where you now live?  I have seen lots of that over my mortgage career – the question most times is: “how do we handle the loan?”  Not all parents are in a situation to sell their existing home or buy one closer to their children.

With all the changes in the mortgage industry, loan guidelines have become tighter which means it can be harder for those with limited income or an existing home to buy a residence closer to loved ones. I am finding more and more kids are looking to buy homes for their parents who might not be able financially, or credit wise, to do it on their own (or until their current home sells).

A few years ago, I might have steered you towards buying one as an investment property, but now Fannie Mae guidelines allow for children to buy a home for parents who do not qualify on the loan on their own. It can be purchased by the children at “owner occupied” rates and with as little as 5% down rather than the higher rate and the 20% down for investment properties.

If down the road, your parents are in a position to pay-off the loan (e.g., sold previous home), and you want to put them on the title, you can always meet with your local real estate attorney to add them. If this is a possibility, it’s important to avoid loans with pre-payment penalties.

Do you have a story about a loan like this or would you like more information?  I am here and ready…thanks for reading!

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